Procter & Gambles online moment of truth

Procter & Gamble has long had the ability to strike fear into the hearts of its rivals. At Unilever, L’Oreal, Wilkinson Sword and Reckitt Benckiser, marketers know they are up against a formidable competitor.

From using its knowledge about the way shoppers behave to sharing consumer research with retailers and turning these insights into powerful campaigns, P&G is a daunting adversary in retail marketing. When the Cincinnati household cavalry charges, competitors run for cover.

So should they be worried about P&G’s latest move? At first glance, it doesn’t sound particularly frightening. P&G has bought a 1% share in UK online retailer Ocado – which delivers groceries for Waitrose – for £5m.

This is the first time that P&G has made an investment in a retail operation. Some have leapt to the conclusion that taking a stake in Ocado is part of an embryonic plan by P&G to one day bypass powerful retailers such as Tesco and Walmart and sell products direct to customers. After all, its goods are also for sale through theEssentials.com, a website in America that sells only P&G products. Surely these are just preparations for the day when marketing changes forever and brand owners forge direct relationships with their consumers…

Others think such a scenario is rather unlikely. Few people would buy washing up liquid, laundry detergent and razors over the web separately from the rest of their groceries. For most shoppers, these brands are low-interest essentials. However, who knows how retailing might change over the coming decades?

The company says the real purpose of the move is to gain access to the data which Ocado records about the way people buy their groceries over the internet. No cause for concern amongst rivals here – this quest for data is similar to what any packaged groceries company does with bricks and mortar retailers.

And there’s no reasons for trepidation about P&G rifling through rivals’ confidential information, claims the company. “We are going to be really principled,” a spokesman insists. There will be no peaking at competitors’ margins. The company will respect rivals’ intellectual property.

Understanding why people chose one product over another and how best you can influence and shape that choice in favour of your brand is the lifeblood of retail marketing.

However, fast moving consumer goods (FMCG) companies have long been accused of failing to apply their retail techniques to the web. Retailers can potentially inflict further damage on FMCG brands in e-commerce through their own label products. So this is an area where brand owners really need to improve their game as online grocery shopping grows.

Ocado is an interesting brand. It has managed to inject humanity and personality into an online grocery sector which is coldly functional. In the early days, many dismissed Ocado as a non-runner. P&G’s investment gives it a strong dose of credibility.

Through accessing Ocado’s data, P&G will be able to test out the effects of its online and offline marketing campaigns on the way people buy its products online.

The wonder of the web is that it enables brand owners to create a detailed picture of the buying process. You can see how the user arrives at the e-commerce site, the order in which they buy the products, “hover time” when choosing between rival brands and the “reference” brand by which categories are judged. In the bricks and mortar world, much of this info can only be obtained by the somewhat dubious method of secretly filming shoppers as they walk round supermarkets. The web obviates the need for such practices.

P&G believes it will gain insights from Ocado which it can feed back into the websites for its top brands. It will also test out marketing campaigns to see how it can increase online market share.

For now, rivals may not be exactly trembling in their boots at the prospect of a web-savvy P&G. But the US giant has recently struck an information sharing and training deal with Google, so it is clearly on a push to increase the power of its web presence. As ever, P&G’s greatest weapon is knowledge. One drawback could be that the knowledge it gains from web operations is so complex that P&G may struggle to make sense of it all.

This deal gives P&G a chance to apply its “two moments of truth” philosophy to the web. In the supermarket, the first moment of truth is when the shopper chooses a product. The second moment is getting it home and using it. Monitoring Ocado shoppers will enable P&G to glean insights into the first moment of truth on the web. That should cause at least a little anxiety to its competitors.